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Employment Tax Incentive Bill

While there has not been agreement from all parties on the Employment Tax Incentive (ETI) Bill, and the roll out, it was formally published on 4th November, 2013.  With the January go live date, there are still some issues that need to be finalised, but simply put, the concept is as follows:
  • The incentive runs from January 1st, 2014 to December 31st, 2016
  • The employee must be between 18 and 29 years old on the last day of the relevant month
  • The employee must earn a wage of less than R6 001 per month
  • The incentive can only be claimed in the months when the remuneration is under R6 001 
  • The employee must have been engaged after October 1st, 2013
  • The employer must be eligible by being 
    • Registered for PAYE
    • In good standing with SARS
    • Not local, provincial or national government

Limited to South African citizens and valid asylum seekers, the main driver is for youth employment, however, the incentive also applies to employment in Special Economic Zones (SEZ) and to industries that can be specified by the Minister of Finance, at his discretion.

Practically, if a company hires 10 20 year olds and pays them between R2 000 and R4 000 every month for one year, there is a monthly tax incentive of R10 000, directly deducted from the company's PAYE submission.   This amount halves in year two.   As this hiring could also be part of a learnership / apprenticeship / internship program, there is also the opportunity for skills development levy returns, as well as the standard training tax incentives.

As a combination, this should make internship and training initiatives more attractive for companies, as well as adding value to the economy as a whole, by growing skills and reducing unemployment.

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